PROJECT SUMMARY/ABSTRACT The elderly and those suffering from chronic disease increasingly rely on home health care (HH). Over the last decade, the number of home health agencies (HHAs) has increased by over 50% and expenditures have doubled. These trends are expected to continue as technology allows more individuals to receive care at home, and as payers and providers are looking for cost efficiencies. Developing the science and identifying the policies that will allow the elderly to maximize their health and independence in cost effective ways is a major theme of the NIA's ?Strategic Directions for Research on Aging,? and the CMS policy as directed by the Affordable Care Act (ACA). ACA specifically calls for CMS to update the HH payment system to reflect factors influencing costs, health outcomes being a major one, and to undertake studies to develop the evidence base to support such updates. This project is designed to contribute to the evidence base linking costs and patients' health outcomes. This project will investigate the relationship between costs and patient health outcomes in HH through the study of cost functions. It will link primary and secondary data. A national web-based survey will be administered to 12,000 HHAs nationally. The survey will be sponsored and sent out by the National Association of Home Care & Hospice (NAHC). Survey responses will be linked to national OASIS and cost reports data to create a unique dataset, which will allow investigation of the costs and effectiveness of specific improvement strategies and actions. The study will employ sophisticated econometric techniques to estimate cost functions for HHAs. The project is also proposing to disseminate its finding to HHAs, policy makers, and others through a newly developed web-based application that would allow the user to obtain preliminary estimates of effectiveness and costliness of improvement initiatives under user specified scenarios. This app will be based on the relationships estimated in the first part of the project. Throughout, the project will benefit from the support and advice of a NAHC National Advisory Group composed of directors and financial officers of HHAs nationally. The knowledge generated by this project will inform policy makers and HHAs about the relationships between costs and patient health outcomes in different types of agencies and markets and will offer important guidance and insights to policies designed to incentivize efficient and effective care.